Lately I’ve had several people ask “How much less than asking price would you typical offer on a house?” Well, I could answer that question with statistics that the average sale in a particular neighborhood may be 5% below asking price. Although, the true answer to the question is, it depends, every seller and every house is different.

Offering too little:
In any market, the nicest house in the neighborhood for the best price is going to sell the quickest. If that’s the house you’ve found, and it’s fresh on the market, don’t low ball and risk losing out if there’s multiple offers. We recently sold a house like this in 5 days.

Some bank owned foreclosures go on the market at an amazing below market price with the intent of generating multiple offers immediately. Of course if you offer low in that case, you’ll probably be out of luck. I personally offered 6% above asking price on a house like this, which I still lost.

Offering too much:
In my opinion there’s a lot of overpriced homes out there. If a home is overpriced and you offer 10% below asking price it could still be too much. Some people are willing to pay a premium for a home that fits their taste perfectly. That’s okay, because a home is a personal thing, not just a business transaction. However, keep in mind that you’ll need an appraisal if you plan to finance your purchase.

Determining the right offer:
Ask your buyers agent to give you a list of properties that have recently sold in the area. Comparing the home you want to purchase to other houses in the neighborhood is the best way to determine value (that’s what the appraiser will do too). Once you’ve nailed down what the market value is, now decide what you’re actually willing to pay. I always tell people ignore the asking price and and determine what it’s worth to you. Maybe it’s worth less to you, because it’s missing a feature you want. Or Maybe it’s worth more to you, because it’s a block from your day care. Now that you know what your top dollar is, consider your initial offer. If there’s lots of activity on the property, you may consider offering your top dollar right away. However, if a property has been sitting on the market for 6 months without much interest, start low and play the negotiating game.

The bottom line:

Try to get a good price, but don’t get greedy.

Consider what the home is worth to you and the market, ignore the asking price.

Keep in mind, every transaction must benefit both sides of the transaction